Summary: The economic impact of COVID-19 is likely to be with us for a while. The good news is that there are simple principles that increase your likelihood of not just survival but success. I’m using restaurants as my example below. Why? Because they’ve been steam-rolled by COVID-19. In spite of this, many are succeeding. Would you like to know how?

Psychologist Martin Seligman, now recognized as one of the founders of the field of positive psychology, began by focusing on depression. Like most psychologists, his training and clinical orientation was around diagnosing problems and helping people move towards normal.

If you imagine a bell curve:

What Seligman realized is that all of his attention and focus was on the left side of the curve. If he was working with someone struggling with PTSD, he was helping them move up the left-hand side of the curve from feeling awful through worse towards normal.

Seligman started to realize that the right side of the curve was ignored. For example, most people who experience PTSD are still (or soon return to) functioning normally. They aren’t doing worse than others, let alone awful. However, that is where the attention sits.

Some, who experienced PTSD, actually ended up feeling better than others. Some were even feeling outstanding. Seligman became curious about this. He began to explore what we could learn about people who thrived despite (or because of) challenges.

As it turned out, there was a lot to learn. A whole new, and very important, branch of psychology emerged.

COVID19 and hard-hit businesses

I have friends and family in the restaurant business. Few industries have been as brutalized by COVID-19 as the restaurant industry.

I recently wrote an article about how all of my clients were experiencing record-breaking years. A friend (and restaurant owner) pointed out that none of my clients were restaurants. That’s true. So I decided to look into that industry more deeply.

Projections vary, but there are estimates that between 60% to 85% of independently owned restaurants are likely to close as a result of pandemic conditions.

This is grim. There is no way around that. If you or someone you care about own a restaurant – survival is a front and center conversation.

Here is the question I don’t hear many people asking: What will the 15% to 40% of the restaurants that survive and even grow do differently?

Emerging success stories

Restaurant chain success: Large chains are the restaurants doing the best during COVID-19. Many chains are actually growing through this crisis. This is primarily due to a few factors:

• They have mastered operational efficiencies. Successful chains have honed their operational practices to minimize waste and reduce costs in terms of effort and product. As a result, they have better profit margins and more financial buffer.
• More cash reserves. More chains have cash reserves set aside to help during hard times.
• Better access to capital. It is easier for chains to get help and financing when needed. This is often connected to having stronger business models, which give lenders more confidence.

So, that’s great for chain restaurants. What does that mean for independent restaurants?

Here’s the thing: Most chains began as independent restaurants – who learned to master operations, which made it easier to build up cash reserves and improved access to capital, which supported growth.

As the old saying goes, “Banks don’t want to lend to you until you no longer need them.”

What is the lesson for small, independent restaurants? Think like a chain – learn to be efficient in operations and careful in your financial management while continuing to provide what your customers want.

For many restaurants, that is a “would have been nice to have known” lesson.

So, what do you do now?

What successful independent restaurants are doing

Here are a handful of independent restaurants who have, so far[1], reported holding steady and even growth during COVID-19:

Addo: Serves innovative Puerto Rican cuisine in Seattle. They also sell groceries and offer pop-up experiences. Read more.

Edwins: French dining in Cleveland, Ohio. They are also a bakery, butchery, and provides job training for formerly incarcerated individuals. Read more.

Saint Dinette: Midwestern French cuisine in St Paul, Minnesota. Read more.

Drunken Oyster: A Cajun-inspired seafood bar in Amarillo, Texas. Read more.

What are they doing?

They are doing what I’ve described in past articles – which can be summed as “just enough defense” and “smart, aggressive offense.”

Just enough defense

I go into detail on this topic here[2].

These restaurants are playing defense – keeping their employees and customers safe and managing their cash flows.

Aside from this, the primary defensive option is operational efficiency. They find ways to become even more efficient at offering the same value to their customers. In the list above and for other restaurants this often looks like:

• Online ordering: Allowing customers to view the menu and order online. It reduces the staff time needed to make the order, maintains social distancing, and improves kitchen efficiencies as online orders offer more lead time than dine-in orders.
• Self-delivery: Delivery services often consume the entire profit. Many restaurants have been able to maintain (or even increase staffing) by converting them to delivery drivers.

Outside of what these articles show these additional defensive measures have been consistently shown to decrease costs:

• Address and resolve conflict: Many studies indicate that unaddressed conflict can have a cost equivalent to 25% of your payroll. Additionally, workers comp claims, sick days, and turnover increase while productivity decreases in workplaces with unresolved conflict.
• Clarify processes, systems, roles & responsibilities: Ambiguity breeds conflict and wastes time. Make sure everyone knows what they are supposed to do and what they can expect others to do. Anything that needs to be repeated should have a written process that describes how it should be done.

What none of these restaurants are doing is just waiting for this to pass, hoping that someone or something will save them, or continuing to do the same thing hoping they won’t need to change.

Smart, aggressive offense

These and other successful restaurants are focused on the future and the long game. They engage these five principles for their offense:

• Business as usual as much as possible: Don’t require customers to act as they usually would. Instead, bring as much of you to the customer as possible.
• Focus on value to the customer: These restaurants are laser-focused on understanding the customer’s needs and desires and pivoting to meet them.
• Experiment: They are experimenting, trying new methods which include things like:
  • Offering meal-kits
  • Creating “take-out” friendly meals
  • Offering expanded hours (Fine-dining restaurants offering “drive-through” breakfasts)
  • Meal plans (subscriptions)
  • Offering groceries related to the kinds of meals your restaurant is known for
  • Delivering or offering groceries along with meals
  • Food trucks
  • Requiring pre-orders
  • (As mentioned earlier) Online orders and taking delivery in-house
• Marketing: Dining is a social experience. These restaurants stay connected to their community and aggressively market their availability and offerings. Most use free (or nearly free) social media to get their promotions and messages out.
• Expand: For growth-minded owners, this is an opportune time to expand. It’s easier to negotiate rates, prime space is opening up, struggling businesses are open to acquisition, etc.

As I engaged in this research, a number of other observations emerged:

• Attractive or distinctive food mattered
• Convenience for customers was important
• Creating community added value

Now, I’ll be honest. It was difficult to find examples of individual restaurants that had positive stories about their success.

Here’s what wasn’t difficult: Finding chains or restauranteurs (owners of multiple restaurants) that were growing quickly.

Over and over again, I came across articles and news reports about both national and local chains or restauranteurs who were expanding, acquiring, or starting new restaurants during the pandemic. Many said that COVID19 was essentially opening up the market for them.

As mentioned earlier, these owners typically following the principles I’ve outlined above. They had already figured out how to have just enough defense with a smart, aggressive offense. They are now able to run with it.

Can your restaurant make it?

Many, perhaps most, won’t make it to next year or next spring. This isn’t up to fate or chance. The ones who do can be expected to have done things differently. The closer they follow the principles I’ve described above, the higher the likelihood that they’ll experience success. ‘

Don’t operate a restaurant?

That doesn’t matter. These principles are working in any industry. As I mentioned earlier, all of my clients are experiencing record-breaking years.

I care deeply about entrepreneurs and small business owners. It is often a tough road making a business work.  Our communities need your success. For your services, the jobs you create, and the opportunities you provide.

You can do it.

Take good care,

Christian

[1] Many of the linked stories are from March. I’ve confirmed that these restaurants are still operating and staying the course. These earlier articles were the only ones I could find that provides some insight into their approach.

[2] In case you don’t want to take my word for it, my observations are backed up by research out of Harvard Business School.

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